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COVID-19 Impact and Response to the COVID-19 pandemic across the countries of the Pacific Alliance Last updated on 15 May 2020

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Page 1: COVID-19 · In addition, the CNBV granted to listed companies (i.e. issuers of equity, debt or other type of securities that are registered in the National Securities Registry) a

COVID-19Impact and Response to the COVID-19 pandemic

across the countries of the Pacific Alliance

Last updated on 15 May 2020

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COVID-19Legal considerations and implications

In light of the outbreak of the COVID-19 pandemic, the four countries in which Affinitas is present are taking specific actions to mitigate the spread of the coronavirus. They also have specific regulations that will impact business operations in each country.

Our member firms have reacted swiftly, are fully operational via remote working arrangements, and are informing clients about these measures and regulatory frameworks to help clients make sense of the risks faced and mitigation strategies they can implement.

This report bundles the legal considerations and implications of the response measure across 5 different practice areas. By clicking on the header, you will be taken to the corresponding page in the document.

[email protected]

Banking and Finance

Infrastructure and Project Development

1. Prudential or regulatory measures

2. Extensions of deadlines for regulatory obligations, and moratoria on loan repayments

3. Impact on shareholder compensation mechanisms

4. Sector guarantee regimes or guaranteed credit programs, and eligibility criteria

Copyright © 2020 - Affinitas

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, or otherwise without the prior permission of Affinitas.

1. Emergency measures that might lead to suspension, delay or general disruption

2. Force Majeure or other Excuse for Non-Performance claims3. Impact of legislative or regulatory measures on contractual

agreements4. Fiscal or financial relief measures

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COVID-19Legal considerations and implications

[email protected]

Labor and Employment

Restructuring and Insolvency

1. Applicable regulation and what are the contingency measures taken to control or restrict (physical) access to the workplace?

2. Health and safety standards

3. Regulations and recommendations related to home office or teleworking

4. Government programs or support schemes, and eligibility

5. Employment contracts and payment of employees’ remuneration

1. Measures aimed at protecting debtors

2. Suspension of obligations related to filing and proceedings

3. Liabilities for company directors

4. Impact on operation of Insolvency courts and tribunals

Tax1. Extension of deadlines for filings or payments, deferred payments, or

accelerated refunds

2. Corporate / Business income tax

3. VAT

4. Indirect taxes

5. Trade or customs duties and related taxation

6. Audits and sanctions

7. Other tax relief measures

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Banking and Finance

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BANKING & FINANCE

Have any prudential or regulatory measures been issued as aresponse to the COVID-19 pandemic that impact the FinancialServices sector?1

On April 24th the Law Nº 21.229 was published in the Official Gazette which is intended to promote, ease and extend the access to liquidity for those economic agents in need.

The Law eases the requirements for the use of the “Small and Medium Companies Guarantee Fund” (FOGAPE) and allows the fund capitalization of up to US$3.000.000.000. which will allow the banks to provide working capital credits facilities for the companies for up to US$24.000.0000.000.

The credit line will be offered by the banks and shall be available for most of the banks commercial customers that meet the basic eligibility requirements.

The amount of the Covid-19 credit line can go up to 3 months of the company sales, considering, as a reference, the period between October 2018 and September 2019.

This credits will bear a nominal interest rate of 3,5%.

The credit line will have a 6 months grace period and payable in installments in a period between 24 and 48 months.

For the companies that subscribe the Covid-19 credit line, the banks shall delay any amortization of others preexistent credits for at least 6 months.

Indeed. The Colombian government has issued Decree No. 417 of 2020 as well as other regulations to deal with the pandemic. Financial Services have been considered an exception for the mandatory isolation; thus, banks and other financial institutions must keep branches open to the public to ensure such public access to financial services (i.e. cash withdrawals, payments and other financial transactions. Notwithstanding, financial institutions have been ordered to create safety protocols for their clients and employees in ways that allow the continuity of their in-branch operation.

The Mexican Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) (the “CNBV”) has issued several resolutions establishing certain measures and grant relief to its supervised entities as a response to the COVID-19 pandemic that impact the Financial Services sector.

CHILE COLOMBIA MEXICO PERUIn addition to the guaranteed credit program described below, the following main prudential and regulatory measures have been issued in response to the COVID-19 pandemic that impact the financial sector in Peru:

• Qualification as essential service: Services provided by financial institutions were qualified as “essential” by Supreme Decree 044-2020-PCM, which declared a mandatory quarantine in response to the pandemic which has been extended as of the date hereof to May 10, 2020 (as amended and extended, the “Emergency Decree”), and are therefore allowed to continue operations and attention to the general public throughout the emergency.

• Reserve requirements: Certain reserve requirements for banking institutions (encaje bancario) in both local and foreign currency have been decreased (C. 010-2020-BCRP and C. 011-2020-BCRP) by the Peruvian Central Reserve Bank (Banco Central de Reserva del Perú, the “BCRP”) in order to increase liquidity in the market.

• Credit provisions: The Banking and Insurance Regulator (Superintendencia de Banca, Seguros y AFP, the “SBS”) has issued a directive (R.SBS. 1314-2020) dispensing banking institutions participating in the Reactiva Program (described below) from constituting credit provisions regarding the guaranteed portions of loans under the program.

• Withdrawal of funds from Private Pension System: A law enacted by Congress (Law 31017) has authorized withdrawal of up to 25% of funds held by individuals with private pension fund administrators (AFP), with a limit of 3 Referential Tax Units (currently equivalent to PEN 12,900 or approximately USD 3,900 at the current exchange rate).

• Operational directives have established the terms and eligibility requirements for such withdrawals.

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BANKING & FINANCE

Have there been any extensions of deadlines for regulatory obligations for listed companies? Are there any guidelines on legislative and non-legislative moratoria on loan repayments?2

The deadline for submission of audited financial statements that supervised entities must submit to the CMF in March was extended for an additional 15 calendar days.

The deadline for banks to liquidate the debtor’s assets adjudicated between March 1st 2019 and September 30th 2020 in a liquidation process for unpaid obligations is extended by 18 months.

First application of the new provisions and criteria of the Compendium of Accounting Standards is postponed to January 2022.

It is allowed to consider as part of the voluntary provisions that make up the effective equity of the banks, a proportion of the guarantees granted by the Treasury, CORFO and FOGAPE, which cover the credits granted by the banks.

The Colombian Superintendence of Finance (“SFC”) as supervisory authority of the securities market in the country, hasn’t so far issued any measures extending regulatory deadlines for registered nor listed companies. Instead, the governmental entity has started a campaign to continue its operation exclusively by digital means. As most of the current procedures and obligations for listed companies were already being done through digital platforms on the SFC webpage, up to date all reporting and information obligations are still mandatory within the established deadlines.

The SFC External Circulars No. 07 and 014 of 2020, by means of which it ordered credit establishments (banks, financial corporations, among others) to create policies and procedures to attend potential massive late payments or defaults on active loans held by these entities. If policies put in place by a local bank effectively create debtor`s relief (i.e. grace periods) said entity is allowed a special accounting treatment for the respective loans within its balance sheet, particularly on credit rating, provisions and reserves.

In accordance with the resolutions issued by the CNBV, the legal terms relating to audiences and proceedings carried out before the CNBV were suspended until May 30, 2020. Additionally, the CNBV provided online alternatives to comply with reporting obligations that required to be physically filed before the CNBV, in order to temporarily provide regulatory relief to Mexican financial institutions and entities supervised by the CNBV (including securities issuers).

In addition, the CNBV granted to listed companies (i.e. issuers of equity, debt or other type of securities that are registered in the National Securities Registry) a temporary option to extent for approximately 45 business days the submission of their annual and quarterly financial information with the CNBV and the corresponding stock exchange.

Likewise, the CNBV issued a resolution that introduced special accounting criteria applicable to Mexican banking institutions, and other financial institutions, on a temporary basis, with respect to consumer, housing and commercial loans -such as mortgage-secured loans, revolving and non-revolving loans aimed to individuals such as car loans, personal loans, payroll loans, credit card and microcredit; as well as commercial loans aimed at legal entities or individuals with business activity in its different forms, including agriculture and livestock- in order for such institutions to be able to grant relief for clients whose source of revenue is affected by the measures adopted by the authorities to contain the pandemic caused by the COVID-19.

The measures consist on deferring, either partially or in whole, the principal and/or interest payments of loans that were effective and in force as of February 28, 2020, for up to 4 months, with the possibility of extending it to an additional 2 months, with respect to the total outstanding amount payable, including ancillary payments, in the understanding that the balances may be frozen without causing interest.

In the case of financial institutions, both the BCRP and the SBS have issued directives (R.SBS 1259-2020 and C. 009-2020-BCRP) providing extensions of deadlines for regulatory obligations, including for the presentation of information required by the BCRP (except for certain information related to currency exchange and money markets) for the duration of the Emergency Decree. Terms corresponding to administrative proceedings with the SBS have also been suspended.

In the case of listed companies, the Securities Market Regulator (Superintendencia del Mercado de Valores, the “SMV”) has issued directives (R.SMV 033-2020) providing extensions for the presentation of financial, risk rating and economic group information to the SMV. Likewise, terms corresponding to administrative proceedings with the SMV have also been suspended.

Regarding loan repayments, the SBS has issued directives (Oficio Multiple 11150-2020-SBS) to financial institutions enabling them to adopt exceptional measures (including amending the relevant loan agreements without contacting retail clients individually) in order to extend the terms of the loans for up to 6 months, provided that as of the date of the Emergency Decree the relevant debtors were up to date in their loan payments.

CHILE COLOMBIA MEXICO PERU

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BANKING & FINANCE

Have regulators issued any recommendations or obligations that need to be taken into account with respect to the payment of dividends, share buybacks or other shareholder compensation mechanisms?3

Not yet. There is a bill that modifies Law 21.227 (Employment Protection) and would eventually prevent the distribution of dividends among shareholders to all corporations that had suspended the employment relationship with their employees, for the fiscal year corresponding to which the suspension was applied.

No recommendations have been issued by government regarding the payment of dividends and other forms of shareholder’s compensation. Instead, Decree 398 of 2020 recently issued allows corporations to amend already summoned shareholder’s general assembly, with one day notice, from physical meetings into virtual ones.

The Mexican regulators have not issued any recommendations or obligations relating to the payment of dividends, share buybacks or other shareholder compensation mechanisms.

The SBS has issued a memorandum (Oficio Multiple 11220-2020-SBS) to regulated financial institutions, exhorting the members of their shareholders’ meetings to capitalize the entirety of their profits corresponding to the year 2019 in order to strengthen their regulatory capital. No specific recommendations or obligations have been issued regarding dividends, share buybacks or other shareholder compensation mechanisms.

CHILE COLOMBIA MEXICO PERU

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BANKING & FINANCE

Are there any public sector guarantee regimes or guaranteed credit programs aimed at mitigating the liquidity issues for companies hit by the economic effects of the pandemic? What determines the eligibility for Borrowers to participate in such programs?

4

The eligibility for borrowers is determined by their annual sales volume. Companies with annual sales up to 1.000.000 UF (US$34,400,000) will be able to access the funding guaranteed by the FOGAPE.

In the case of the exporters, the funding access is limited to those which exported amount had been in the 2 previous years, in average, a FOB value equal or less than US$16.700.000 annually.

In both cases, there must be working capital need or investment projects.

Therefore, the maximum percentage of debt coverage and the maximum amount of financing to be guaranteed will depend on the annual sales volume, according to the following:

a. Companies with annual sales lower than 25.000 UF (US$859,000): the FOGAPE cannot guarantee more than the 85% of the debit balance nor guarantee funding over 6.250 UF (US$215,000).

b. Companies with annual sales between 25.000 UF (US$859,000) and 100.000 UF (US$3,440,000): the FOGAPE cannot guarantee more than the 80% of the debit balance nor guarantee funding over 25.000 UF.

c. Companies with annual sales between 100.000 UF (US$3,440,000) and 600.000 UF (US$20,600,000): the FOGAPE cannot guarantee more than the 70% of the debit balance nor guarantee funding over 150.000 UF

d. Companies with annual sales between 600.000 UF (US$20,600,000) and 1.000.000 UF (US$34,400,000): the FOGAPE cannot guarantee more than the 60% of the debit balance nor guarantee funding over 250.000 UF.

The credit may not be granted to companies that are currently in a reorganization or liquidation plan of their assets.

Will not have access to the funding either micro or small businesses that have been in default in the banking system for more than 30 days as of October 31, 2019. Neither will medium and large businesses that have been in default in the banking system for more than 30 days as of March 31 this year. Unless they regularize their situation at the time they apply for the Covid-19 credit line.

The Colombian government has created several credit programs, granting financial aids to a variety of companies affected by the pandemic. These loans will be disbursed by public financial institutions depending on the type of activity developed by the particular enterprise (agriculture, tourism, aviation, intellectual property, etc.). The eligibility criteria for borrowers is set for every type of credit, with loan cap limits per enterprise.

One of the main institutions assigned with this task is Bancoldex (“Banco de Comercio Exterior de Colombia”), which is currently offering several credit products for small, medium and big size companies, along with territorial authorities such as local mayors, or other public institutions as the Agricultural Bank of Colombia (Banco Agrario de Colombia).

Finally, the national government has created the Emergencies Mitigation Fund (Fondo de Mitigación de Emergencias – FOME”) to offer financial support to the healthcare system and production activities affected by the Covid-19 crisis. This includes giving temporary liquidity support to financial institutions that require it and making direct investments in private companies through the acquisition of shares or debt instruments.

The Mexican Ministry of Economy announced credit program in accordance with which the government will grant one million credits of MXN25,000 (a little over USD$1,000). Only small business which were already registered in a social census made by the government before the pandemic started will have a right to receive this type of loans.

Additionally, the Mexican Institute of Social Security (Instituto Mexicano del Seguro Social) launched a similar credit program as the one mentioned above (i.e. one million credits of MXN25,000). The borrowers eligible for this credit program are small business that have not fired any of their employees as a consequence of the pandemic.

Yes, the Peruvian government has launched the (a) Reactiva Peru relief program (the “Reactiva Program”) and (b) a credit portfolio guarantee program (the “Credit Program”).

a. Reactiva Program: This program, which has been subsequently increased to PEN 60 billion , essentially provides a government guarantee for loans made by local banks to finance working capital needs of companies, with a coverage amount of the guarantee ranging from 80% to 98%, depending on amount of the loan.

Below is a summary of the main features of the Reactiva Program:

i. Purpose: Guarantee the loans granted by local financial institutions (“banks”) in the context of the Reactiva Program to companies (“borrowers”) in order to finance their working capital needs (i.e pay suppliers and workers).

ii. Amount and currency: Maximum of PEN 10 million. Loans must be in PEN. iii. Term: Maximum of 36 months, including a grace period for principal and

interest payment of up to 12 months. The loans can be disbursed by the banks until June 30, 2020, although this term could be subsequently extended by the government by means of a Supreme Decree.

iv. Interest rate: Must reflect the funding cost and margin of the relevant bank, subject to the conditions established by the BCRP.

v. Use of proceeds: Working capital only (use of proceeds is restricted as described below).

vi. Restrictions: Proceeds cannot be used by the borrowers to: (a) pay financial obligations, (b) distribute dividends (other than to workers), (c) purchase fixed-assets, shares or equity interests, bonds or financial assets, or (d) make equity contributions.

vii. Government guarantee: The government guarantee covers the loans based on their amount: (a) 80% for loans between PEN 5 million and PEN 10 million; (b) 90% for loans between PEN 300,000 and PEN 5 million; (c) 95%, for loans between PEN 30,000 and PEN 300,000; and, (d) 98%, for loans below PEN 30,000. The government guarantee is implemented through a trust managed by COFIDE, to which the banks must accede. The guarantee becomes effective since the moment COFIDE issues a trust participation certificate in favor of the relevant bank. The guarantee can only be enforced by the banks after a default in payment by borrowers has persisted for 90 calendar days.For such purpose, the banks must notify COFIDE, who in turn will notify the Ministry of Economy and Finance (“MEF”) in order for funds to be transferred to COFIDE for the payment of the guarantee. After such time, the relevant bank will be substituted by COFIDE as creditor for the portion of the loan which has been paid through the guarantee.

viii. Eligibility requirements: In order to be eligible to participate in the Reactiva Program, borrowers must comply with the following main requirements (among others):

> The company cannot have tax debts administered by the tax authority (SUNAT) which are in forced collection (cobranza coactiva) for more than 1 Referential Tax Unit (PEN 4,300, equivalent approximately USD 1,300 at the current exchange rate) as of February 29, 2020.

> The company cannot be not included within the scope of Law 30737 (relative to acts of corruption).

> The company cannot be engaged in certain restricted activities, including production and distribution of tobacco, firearms or alcohol, gambling or adult content companies, etc.

b. Credit Program: This program, for an amount of PEN 7 billion, will provide guarantees by the Peruvian government to credit portfolios of licensed banking institutions, in order to increase their capacity to face liquidity requirements. Banks will be able to use the government guarantee (channeled through a trust or escrow structure) in order to carry out repo operations of credit portfolio with the BCRP. The eligibility requirements and all other operational aspects of the Credit Program will be established through operational regulations issued by MEF.

CHILE COLOMBIA

MEXICO

PERU

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INFRASTRUCTURE AND PROJECT DEVELOPMENT

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INFRASTRUCTURE

Are there any emergency measures that might lead to suspension, delay or general disruption of planned infrastructure projects, or projects currently under development, or in the operation of existing projects?1

Yes, on 18 March 2020 a State of Constitutional Emergency was declared in the country, which entails the exercise of a series of prerogatives by the President of the Republic, including the restriction of the freedom of transit of persons, which in practice has meant a curfew in all the Chilean territory and quarantines in different sectors of the country.

This has led both to the temporary suspension of projects in the areas where quarantine has been decreed – since movement in these areas has been prohibited – and to delays in such projects, since restrictions on the movement of persons have affected the attendance of workers at construction sites and the companies supplying them, thus affecting the entire production chain.

It is likely that both planned and ongoing infrastructure projects are delayed due to the COVID-19 pandemic, because of changes on the investment priorities of the government and restrictions for the performance of the construction works.

By means of Decree 417 of 2020, issued on March 17th, the Colombian Government declared the Emergency State in all the national territory. Since then, the government has been addressing the situation continuously and issued a profusely amount of regulations in order to prevent the spread of COVID-19. By means of Decree 457 of March 22nd, 2020 the government imposed the mandatory preventive lockdown measure, initially from March 25th to April 13th, 2020, now extended until May 25th. Such lockdown derived in the suspension of ongoing construction works related to infrastructure projects as well as to on a severe reduction on the traffic.

Subsequently, the national government issued Decree 482 of March 26th, 2020, with guidelines for the rendering of transportation services and administration of the infrastructure projects during the lockdown, including the suspension of the toll collection on national roads. Equally, this Decree authorized the granting entities to unilaterally suspend the concession agreements.

While the preemptive lockdown measure has been extended by means of Decrees 531 of April 8th, 2020 (from April 13th to April 27th, 2020), 593 of 2020 (From April 27th to May 11th) and 636 of 2020 (From May 11th to May 25th) the infrastructure industry was excluded from the measure since April 28th, being authorized for the resumption of works, provided that the corresponding biosecurity protocols are dully submitted and approved. Further, Decrees 569 and 575 of 2020 laid out general guidelines for the reactivation of the activities and the granting entities have issued resolutions and circulars with instructions for its concessionaires.

Consequently, although currently the infrastructure and transport sector is authorized to resume its activities, under strict biosecurity protocols, the initial measures taken by the national government may have lead to suspension or delays, that must be analyzed on a contract-by-contract basis. Additionally, some contractual obligations such as land acquisition and social management, as well as the main works plan, remain suspended.

On March 30, 2020, the Mexican General Health Council enacted a decree declaring a national health emergency and issued certain sanitary measures including, among others, the immediate suspension, from March 30 to April 30, 2020, of any “non-essential activities” in the public, private and social sectors. Further, on April 6, 2020, the Mexican Health Ministry issued a decree which establishes technical guidelines for certain “essential” activities, in accordance with the abovementioned decree. It is important to note that, although not formally issued through a decree, representatives of the Ministry of Health have announced that the sanitary measures will continue until May 30, 2020 in such areas most affected by the COVID-19 crisis.

Within the description of “essential activities”, there is a list of sectors considered essential for the fundamental functioning of the economy as well as a list of activities whose suspension may have irreversible effects on the economy, among which there are some related to infrastructure and energy. If the activities to be carried out in connection with the energy or infrastructure projects (i) fall within the “essential activities” description, or (ii) fall within the description of activities whose suspension may have irreversible effects for the economy; such activities are permitted to continue.

Also, activities related to the “conservation and maintenance of critical infrastructure that ensures the production and distribution of essential services” are permitted to continue.

Yes. As previously indicated, pursuant to the Emergency Decree, mandatory social isolation has been imposed in Peru from March 16, 2020 until May 24, 2020 as a result of the COVID-19 pandemic (potentially subject to further extensions in all or parts of Peruvian territory). For the duration of the Emergency Decree, the exercise of constitutional rights related to personal freedom and security, the inviolability of homes, and the freedom of assembly, as well as transit across the national territory, have been and continue to be restricted and persons may only transit across public roads for provision and access to essential services and goods.

As a result of the foregoing, the Emergency Decree has led to the suspension of most economic activities in the country, thereby disrupting construction activities nationwide and delaying the development of projects across all sectors. Gradual resumption of economic activities is expected (Law 31017) to commence in May 2020 subject to the issuance of guidelines and protocols by the relevant sectors, in the following areas: mining and industry, construction, commerce of agrarian products and e-commerce, restaurant delivery and notary services, among others.

In connection with the telecommunications and energy sectors specifically (which have been qualified as “essential” services by the Emergency Decree), measures have been issued prohibiting telecom carriers (Urgency Decree 035-2020, OSIPTEL Resolution 045-2020-PD/OSIPTEL) and electricity providers from suspending services to customers due to lack of payment, as well as enabling customers to defer and reprogram payment of their electricity and natural gas bills, and which have caused disruption in projects corresponding to these sectors.

CHILE COLOMBIA MEXICO PERU

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INFRASTRUCTURE

Do Force Majeure or other Excuse for Non-Performance claims risk disrupting the construction of infrastructure projects, or lead to delays in legal, regulatory and contractual milestones of infrastructure projects?

2

In our legislation, force majeure is an exemption from liability for the debtor’s failure to comply with an obligation.

However, in order to see how it applies to the specific case, it’s important to first consider what has been agreed between the parties in the contract, since it is perfectly possible that the debtor of the obligation has accepted to bear the consequences of force majeure and, therefore, cannot invoke it as a legal excuse for not complying with the contract.

If the parties of the contract have not agreed that the obligor must bear the consequences of force majeure, the obligor may claim the impossibility of performing the obligation during the duration of the force majeure and, once it has ceased, request extensions in the performance of the contractual milestones, with the consequent postponement of all the milestones of the respective project.

Yes. The Decrees issued by the National Government established the suspension of works on infrastructure projects and works plans are still suspended on the majority of the cases. Therefore, delays in contractual milestones are likely.

Moreover, in case of occurrence of a Force Majeure event, most of the infrastructure contracts include provisions stating that the project will be suspended whenever a Force Majeure event arises, as well as a potential compensation on time or money (usually limited to direct damages). Equally, most recent concessions include mechanisms for the compensation of reductions on the traffic and the toll collection.

Controversies regarding the impacts of COVID-19 and measures such as the preventive lockdown are likely to arise, unless the contracting entities lay out clear and comprehensive mechanisms for the compensation of such impacts.

Yes, due to the fact that, under the decree issued by the Ministry of Health, all construction activities are considered “non-essential activities” and must be suspended, except for (i) construction considered essential for addressing the COVID-19 public health crisis, or (ii) construction of the “showcase” projects being sponsored by the Mexican Federal Government: the Dos Bocas refinery, the Mayan Railway, the new Mexico City Airport and the Tran-Isthmus Industrial Corridor.

Force majeure provisions usually vary contract by contract and their impact will depend on what is established therein and on how these contractual provisions are interpreted. Such provisions shall also be interpreted under the applicable law to the contract.

The Peruvian Civil code provides a general definition for the concept of force majeure as: any circumstance beyond one’s control consisting of an extraordinary, unforeseeable and irresistible event, which prevents the fulfillment of the obligation, or results in its partial, late or defective performance.

Parties to commercial contracts are free to negotiate the terms of their force majeure provisions, however Peruvian courts will apply the provisions of the Civil Code to the extent that a commercial contract does not address the issue. Under such provisions, an obligation is extinguished if it cannot be executed because of a circumstance beyond the non-performing party’s control. If the circumstance is temporary, the non-performing party is not liable for the late performance of the obligation while the circumstance persists. However, the obligation is extinguished if the circumstance that determines the non-execution persists, until the non-performing party (according to the corresponding agreement or the nature of the obligation) can no longer be considered obligated to execute it, or until the counterparty justifiably loses interest in its performance or such performance is no longer useful for the counterparty.

The obligation that can only be partially executed is also extinguished if it is not useful for the counterparty, or if the counterparty does not have interest in its partial execution. Otherwise, the non-performing party is obliged to execute it with a reduction of the consideration, if any. Furthermore, Article 1317 establishes that the nonperforming party is not liable for the damages and losses resulting from the non-performance of the obligation, or its partial, late or defective fulfillment, for causes not attributable to the non-performing party, unless the contrary is expressly provided by law or by the relevant agreement.

In order to demonstrate the existence of a force majeure event in the absence of a contractual arrangement, the non-performing party must prove that the circumstances that are beyond its control consist of extraordinary, unforeseeable and irresistible events, in accordance with Article 1315 of the Peruvian Civil Code. In practice, Article 1315 may be construed in conjunction with Article 1314 of the Peruvian Civil Code, which establishes that whoever acts with the required ordinary diligence is not liable for the non-execution of the obligation or for its partial, late or defective performance.

In this regard, the response to this question is that, yes, there is a risk that the events surrounding the COVID-19 pandemic and the effects of the Emergency Decree may qualify as force majeure events, and thereby disrupt the construction of infrastructure projects or lead to delays in legal, regulatory and contractual milestones of infrastructure projects (in connection to this last point, note that the Executive Branch has been delegated powers to legislate to address the issue, as further described below).

CHILE COLOMBIA

MEXICO

PERU

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INFRASTRUCTURE

Are there any legislative or regulatory measures that might impact renegotiations of contractual agreements relating to infrastructure projects?3

No, we have no knowledge about any legislative or regulatory measures that might impact renegotiations of contractual agreement relating to infrastructure projects. Notwithstanding the aforementioned, regarding Chilean public concessions, the acknowledgement made by General Concessions Direction expressly recognizing COVID-19 as a force majeure situation, may impact such negotiation indirectly.

Yes. The regulations comprised in the Decrees issued by the National Government already refer to relief measures such as extensions of the agreements due to the suspension on the toll collection. However, remedies for each project shall be negotiated between the parties in the light of the specific impacts in each case.

There are none. As described below, a law (Law 31011) delegating powers to the Executive Branch to legislate, among others, in the matter of investment promotion has been enacted by Congress, which could have an impact on the development of infrastructure projects.

On the other hand, Congress has enacted a law (Law 31018) which forces toll road concessionaires to suspend collection of tariffs for the duration of the Emergency Decree. Note however that the MEF and Executive Branch have publicly opposed this law and have stated their intention to file actions which consider it to be unconstitutional, given that under the Peruvian Constitution concession agreements cannot be modified by law, and the law is expected to have a negative impact on the operation of toll road concessions and potentially lead to government-investor disputes.

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INFRASTRUCTURE

Are there any fiscal or financial relief measures specifically focused on the infrastructure sector?4

Not directly, however, Stamp Tax rates have been transitory reduced to 0% with respect to the taxes accrued till September 30th of this year. This benefit applies to financing and refinancing of infrastructure and energy projects through this period.

Yes, while the suspension of toll collection on national roads during the lockdown is still in place, the following are the financial relief measures comprised in Decree 575 of 2020 for both the infrastructure and the transport sector:• Payment of new fares by the

concessionaires in airports is suspended.

• Co-financing of operating costs of urban transportation systems by the Nation is permitted.

• Entities managing massive transport systems are authorized to access to credits in order to obtain additional resources to cover the operation of the systems.

• The VAT for the air transport service of passengers is reduced to a 5% fare.

• The VAT for gasoline for aviation Jet A1 and/or aviation gasoline 100/130 is reduced to a 5% fare.

• Default of a contractor under a transportation infrastructure contract on its payment obligations with its PYME or MYPYME suppliers shall be regarded as an anti-competitive act.

• • The purchase price of the improvements on abandoned plots shall be established by commercial valuation.

• • The collection of sanctions and penalties for traffic offences may be used for the implementation of actions and measures to verify the observance of the measures taken for the prevention and mitigation of COVID-19 contagion.

• Solidarity and cooperative organizations in the transport sector must allow vehicles owners to return the contributions they have made to the fleet’s replacement program. Vehicles’ owners are eligible to withdraw eighty-five percent (85%) of these contributions.

• Vehicles’ owners affected in their activities due to COVID-19, may withdraw from the Fleet’s Reposition and Renewal Fund for Land Transport Public Service, up to eighty-five percent (85%) of their contributions.

• Up to COP $5,000,000,000 of the resources allocated from the Nation General Budget shall be contributed to the Fleet’s National Fund for the Modernization, allowing the Ministry of Transport to execute with Bancoldex agreements to promote access to credits of natural personas and legal entities associated with the provision of the public transportation services.

No fiscal or financial relief measures for the infrastructure sector have been announced by the Mexican Government.

Measures have been issued (Urgency Decree 035-2020) for the energy, natural gas and telecommunications sectors, easing certain regulatory requirements and the application of sanctioning procedures for certain infractions, as well as suspending terms for compliance with information requirements.

In addition, pursuant to the law mentioned above, Congress delegated in favor of the Executive Branch the power of legislating specifically in the matter of investment promotion, in order to establish special regulations to facilitate the processing, evaluation, approval or extension of titles and rights in administrative proceedings (finalized or ongoing), with the purposes of reactivating investment projects and enhancing their execution.

A Legislative Decree (DL 1500) has been issued by the Executive Branch under the aforementioned delegation, providing that authoritative titles (titulus habilitantes) such as environmental certifications and others, which are required for the execution of public and public-private investment projects and that expire on or before December 31, 2020 will maintain their validity for 12 months following expiration. In addition, companies are exempted from reporting and monitoring obligations relative to environmental regulations which involve performing field work (except for cases where the required information is already available or imminent danger exists).

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Labor & EmploymentCOVID-19 response and mitigation: legal

considerations and implications

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LABOR & EMPLOYMENT

What is the applicable regulation and what are the contingency measures taken to control or restrict (physical) access to the workplace?1

The applicable regulations are (i) the Sanitary Code; (ii) Supreme Decree N° 594 regarding Basic Health and Environmental Conditions in Workplaces; (iii) the protocols and measures informed by the Health Ministry and the Economy Ministry, (iv) the measures and recommendations given by the Labor Authority through opinions issued during the health emergency as well as (v) the general regulation of the Labor Code regarding the employer’s duty to protect its employees (Article 184 and 184 bis of the Labor Code).

In particular, the Government has decreed territorial quarantine in some sectors of the country, which prevents employees to assist to the workplace, unless the functions of the company are considered essential or of public utility. Also, the Protocols issued by the Health and Economy Ministries have indicated –among other measures- the following: identify high risks employees and allow telecommuting work; inform all preventive measures that must be taken in the workplace; make available personal protective equipment; make available water and soap for constant hand washing or, failing that, alcohol gel, and maintain social distancing.

Currently, there is mandatory preventive isolation for all inhabitants of Colombia until May, 11th, 2020 (00:00 hours), as a result of the health emergency that exists in Colombia because of COVID-19. The measure has been taken by the Ministry of Interior through Decrees 457, 531, and lastly 593-2020.

On March 31, 2020, the Mexican General Health Council enacted a decree by means of which extraordinary actions intended to mitigate the health emergency generated by the SARS-CoV2 virus (Coronavirus) were implemented. This decree provided, among other things, an immediate suspension of services and activities on «non-essential» industries, in public, private and social sectors, from March 30 to May 30 of 2020. Therefore, any company providing “non-essential activities” must ban their employees from attending their workplaces during the health emergency.

On the other hand, in the case of those companies that are considered to provide “essential activities”, they must implement, among others, the following measures in their workplaces: (i) essential meetings or congregations are limited to 50 individuals, (ii) senior adults of 60 years or more, breastfeeding mothers, pregnant employees and employees with a chronic disease are exempted from attending the work facility, (iii) a general filter at the entrance of the workplace must be established in order to verify the general health conditions of the attendant employees, and (iv) the employees should comply with the distancing and health measures provided by the Mexican Health Ministry.

Ministerial Resolution N° 239-2020-MINSA (hereinafter, “the MR”) establishes a general regulatory framework in relation to the prevention and control of COVID-19 at the workplace. Contingency measures to control or restrict physical access to the workplace include: (i) not allowing the return of employees with COVID-19 risk factors (i.e., 60 years old or older); (ii) testing employees that hold medium to very high risk positions for COVID-19 before they return; and, (iii) checking employees’ body temperature at the beginning and at the end of their work day.

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LABOR & EMPLOYMENT

Are there any health and safety standards that employers need to comply with to deal with the COVID-19 pandemic?2

The Supreme Decree N° 594 along with the Labor Code, regulate the general duty of the employer to protect the life and safety of its employees, which means that the Company has to adopt all safety measures to assure a safe workplace. In addition, the employer has to comply with all those measures indicated by the Health authority, which include among other: use of obligatory mask in closed places with more than 10 people, constant hand washing, cleaning of desks, furniture and lunch place on a permanent basis, in case of symptoms, informing the employer and not attending work, together with informing the health authority, isolation in case of symptoms in the workplace.

The Resolution 666 of April 24th, issued by the Ministry of Health and Social Protection, adopts the biosafety general protocol or preventive measures which guarantee social distancing and hygiene and protection processes in the workplace, in order to reduce risks arising from the pandemic which could affect workers’ health in all economic and productive sectors, public and private, other than the health sector.

Among the main obligations of the employer, the Resolution includes the following (i) the implementation of the safety protocol; (ii) measures to maintain business continuity and workers’ protection such as shift and working time flexibility and/or implementation of remote or home working; (iii) reporting suspected and confirmed cases of COVID-19 to the EPS and the Occupational Risks Administrator; (iv) creating official communication channels and points of care which incorporate information related to the prevention and care of COVID-19; (v) seeking support in both the Occupational Risks Administrator (for risk identification and assessment) and the EPS for health promotion and disease prevention; (vi) providing protection elements to employees according to their functions, and; (vii) promoting the use of CoronApp to record employees’ health status.

Likewise, obligations are imposed on the worker, contractor, cooperative member or associate such as (i) complying with the biosafety protocols adopted by the company in its workplace and according to his/her functions; (ii) reporting to the employer any case of Covid-19 contagion at work or in the family; (iii) adopting self-care measures; and (iv) reporting to the employer or contractor any health problem, especially the ones related to respiratory disease. Any health impaired shall be reported through Coronapp too.

The competent authority for surveillance and compliance with these protocols shall be the District or Municipal Secretariat, or the Entity that takes its place; the District, Municipal or Departmental Health Secretariat, and the Territorial Directorates of the Ministry of Labor.

On March 20, 2020, the Mexican Labor Ministry issued an «Action Guide for Work Centers against COVID-19«. Such guide has as its main purpose the adoption in the work centers of measures that collaborate with the prevention and attention of COVID-19. The guide is divided in several sections, such as Q&A section about Covid-19, guiding principles that should prevail in the face of health contingencies in the work centers, general control strategies, a care plan in work centers, and a classification of the risk of the employees depending on their position. Notwithstanding the aforementioned, please note that such guide is not mandatory and is only a standard intended to detail what measures could the work centers implement.On the other hand, in the case of those companies that are considered to provide “essential activities”, they must implement, among others, the following measures in their workplaces: (i) essential meetings or congregations are limited to 50 individuals, (ii) senior adults of 60 years or more, breastfeeding mothers, pregnant employees and employees with a chronic disease are exempted from attending the work facility, (iii) a general filter at the entrance of the workplace must be established in order to verify the general health conditions of the attendant employees, and (iv) the employees should comply with the distancing and health measures provided by the Mexican Health Ministry.

Yes. According to the MR, in order to resume their activities, employers must prepare a plan for the prevention and control of COVID-19 at the workplace. Said plan has to contain specific procedures for: (i) the cleaning and sanitizing of the workplace; (ii) the cleaning and sanitizing of employees’ hands; (iii) the delivery of appropriate health and safety equipment to each employee, depending on the risk level of the position he or she holds; among others.

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LABOR & EMPLOYMENT

Are there any regulations or recommendations related to working from home (home office or teleworking)?3

There is a recently enacted Telecommuting Law N° 21.220 which entered into force of April 1st, which thoroughly regulated work from distance and telecommuting, regulating the specific mentions of the employment contract or addendum in which telecommuting is regulated, states that telecommuting cannot mean a reduction in salaries, and that is the employer who must take on the greater expenses of teleworking as well as provide the elements that allow work in this modality. Additionally, this law includes especial protection on health and safety of the employees, among other mandatory health protection.

For remote or distance working, we suggest the following: (i) Remember confidentiality obligations that are in force by the employment contract or reinforce them if it is necessary, (ii) A statement may be prepared to remind those obligations, or an amendment to reinforce certain obligations main points that will be applicable, (iii) Inform the Labor Risk Insurance Company (“ARL” for its acronym in Spanish), (iv) Follow up on company’s devices provided to the employees, leaving a record of the responsibilities assumed in relation to such devices.

Until this point, the Mexican Labor Ministry has not issued any official statement related to home office. Notwithstanding the aforementioned, the Mexican Federal Labor Law provides that the main obligations of home office for employers are: (i) the obligation to provide required materials and work supplies, (ii) pay the salaries of the employees, and (iii) keep a record of homeworkers. On the other hand, employees have the following special obligations, among others: (i) take the greatest care in keeping and preserving the materials and supplies they receive from the employer; (ii) prepare the products or provide their services in accordance with the agreed and customary quality; (iii) receive and deliver the work on the agreed days and hours.

Yes. Urgent Decree N° 026-2020 and Supreme Decree N° 010-2020-TR regulate remote work, which is different from telework. According to these remote work regulations, which will be in force during the sanitary emergency period, employers can implement remote work without their employees’ consent, as long as they: (i) give them adequate notice; (ii) do not affect their salaries and other legal benefits; and, (iii) give them appropriate health and safety recommendations.

CHILE COLOMBIA MEXICO PERU

Are there any government programs or support schemes aimed at preserving employment? What determines eligibility for employers or employees?4

On March 31, 2020, a law that seeks to counteract the harmful effects of the Covid -19 in the economy and particularly in employment, was enacted in Chile. The focus of this law (N° 21.227) is, on one hand, that those activities or tasks that were prohibited or suspended due to an act or declaration of authority, will see the effects of the employment relationship be suspended as a matter of law (unless otherwise agreed), and as a consequence of this suspension the worker will be able to access to the unemployment insurance benefits while the employment relationship is in force. Also the law allows companies that are affected but their activities are not prohibited or suspended by law, to agree with its employees the suspension of the employment relationship to access to the benefits of the law. During the term of the suspension of the employment relationship the employer will be obligated to pay only social security contributions.

On the other hand, the law gives the possibility of agreeing to a reduction in working schedule with their employees, in which case a supplement of the salary will be provided by the unemployment insurance for the workers of companies that are in the special situations that the law regulates.

The Formal Employment Support Program - PAEF was created by Decree 639-2020. Through the PAEF, the Government will grant a monthly economic benefit to protect formal employment, for up to 3 months. According to the Decree, the PAEF will be in force for assistance during May, June, and July 2020.

Legal entities must fulfill the following requirements, in order to apply for the PAEF benefit:1. Have been established before

January 1, 2020.2. The Commercial Registration

renewed in 2019.3. A certified decrease of at least

20% in the Company´s income.

For the PAEF aid, companies must submit a formal request before the Bank including the following documents:1. Application letter signed by the

Company, stating the intention of being a beneficiary of the PAEF.

2. Certificate of existence and legal representation of the Company.

3. Certification letter signed by the legal representative and fiscal auditor, including the following: (i) the number of formal jobs that will be kept for each month, (ii) the 20% income diminishment, and (iii) a statement in which the Company explains that the PAEF aid will be used for salary payments.

The Mexican Labor Ministry has implemented programs intended to reduce the number of employment termination due to Covid-19. The main program is an electronic platform in which employees can denounce their employers if their employment relationship has been terminated or if their salary has been decreased or even canceled due to Covid-19. Through this platform, the Labor Ministry will monitor and provide support to the affected employees, prioritizing at all times the reconciliation between the employee and their employer, so that they can reach a beneficial agreement for both parties and thus avoid reaching litigation.

Another important program consists in the distribution of loans for up to MXN$25,000.00 pesos so that small and medium-sized companies can face the economic impact of Covid-19.

Yes. In addition to the temporary suspension of employment contracts and payment of employees’ salaries, the government allowed employers to use other alternatives aimed at reducing labor costs and preserving employment (i.e., granting pending vacation leave or reaching salary reduction agreements). Further, the government – through Urgent Decree N° 033-2020 – granted companies a subsidy equivalent to 35% of their payroll (only employees with a salary of up to S/ 1,500.00) and created the “Reactiva Perú” program, which will allow companies to access loans to comply with their short term economic obligations.

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LABOR & EMPLOYMENT

Are there any specific measures or applicable regulations related to temporary suspension of employment contracts and payment of employees’ remuneration?5

There is a recently enacted Law N° 21.227 which allows employees to obtain payment from their unemployment fund administrated by AFC due to the covid-19 emergency when occur the temporary suspension of the labor relationship due to an act or statement of authority which prevents or prohibits the provision of services in the context of covid-19 or in case the company agrees the temporary suspension with the employee.

Outside this new regulation, the general rules must be applied in the event of a fortuitous event or force majeure, which, according to the opinions of the Labor Authority, suspends the employment relationship.

Suspension of contracts must be adequately supported, demonstrating that there is in fact an impossibility to perform employment contracts and that other options to protect employees were tried and evaluated. This is so since this type of decision could be reproached by labor, administrative and/or judicial authorities if its implementation lacks factual and legal support.

During Covid-19, the employment contract may be suspended in the following cases:

1. Due to force majeure or fortuitous event. It is necessary to mention that COVID-19 is not by itself a force majeure event. any suspension under this scenario must be structured considering the COVID-19 consequences, focused on the particular case of the company. Under this scenario, the employer makes the decision to suspend the contracts unilaterally, having to notify the workers and the Ministry of Labor of the decision taken (not an authorization request). With the notification to the Ministry of Labor, it is highly probable that a rigorous inspection process will begin, in which the company is required to explain the reasons for the decision made in light of the different recommendations issued to protect employment in Colombia.

2. Due to suspension of activities or temporary closure of the company, in whole or in part, for up to 120 days, with prior authorization from the Ministry of Labor. For this alternative, a formal procedure must be initiated before the Ministry of Labor in which the authorization to suspend work contracts is requested. The authorization request must be supported on technical, economic, or other reasons different than the employer´s will.

3. License or temporary permission. Under this scenario, both parties should agree on the applicable conditions for the suspension of the employment contract. Note that the employee should not be forced to use this alternative.

The Mexican Federal Labor Law provides the suspension of services in case a general health emergency declaration is issued by the relevant authorities. In such scenario, the employers will only be required to pay to their employees one daily minimum salary for up to one month; however, please note that the Mexican authorities have publicly stated that Covid-19 health emergency is different to such scenario, and therefore employers should not pay one daily minimum salary but instead the full employees’ salaries during the health emergency.

On the other hand, in case an employee is diagnosed with Covid-19, the Mexican Federal Labor Law provides that the employment relationship between the employee and the employer will be suspended, and consequently the employee’s salary will be paid by the Mexican Social Security Institute.

Yes. Urgent Decree N° 038-2020 and Supreme Decree N° 011-2020-TR regulate the temporary suspension of employment contracts and payment of employees’ salaries. In order to use this alternative, a company must prove – among other things – that: (i) it cannot implement “remote work”; (ii) it cannot grant its employees paid leave; and/or; (iii) it is going through a dire economic situation (Supreme Decree N° 011-2020-TR established sales v. salaries ratios that would have to be met). The temporary suspension of employment contracts and payment of employees’ salaries should be used as a last resort.

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Restructuring & Insolvency

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RESTRUCTURING & INSOLVENCY

Are there any specific COVID-19 measures aimed at protecting debtors (standstill on contractual obligations, public loan or credit programs, moratoriums on loans and mortgage payments, etc.)1

At the moment there is no specialregulation in place.

According to Article 16, L. 1116/06, any provision for the unilateral termination of a contract that encompasses the entrance of a company to the Insolvency Regime as a ground to terminate the Contract shall be null and void. This also includes provisions to accelerate the obligations that the creditor might have in favor and in charge of the debtor who intends to be accepted in the Colombian Insolvency Regime. The consequences of activating a provision in this sense implies the credits of such Creditor shall be graduated and classified at the end of the line (“Crédito Postergado”) and the withdrawal of all the guarantees that such creditor should have over any asset of the Debtor.

The National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), together with several institutions of the Financial System have implemented certain measures in benefit of debtors, such as deferral of payment periods and suspension of accrual of interests. Such protective measures do not apply on a general basis and under the same terms and conditions; they were implemented in specific products of each financial institution in particular.

Yes, on May 11th, 2020, the Government issued the Legislative Decree No. 1511 creating the “Procedimiento Acelerado de Refinanciación Concursal” or “PARC” by its Spanish acronym, a fast-track, special, transitory and entirely online insolvency proceeding with the purpose of protecting Peruvian companies by allowing them to reschedule their due and unpaid liabilities in order to avoid insolvency, loss of business and loss of employment. The purpose is to provide reasonable assurance to creditors and protect the payment system of the Peruvian economy.

Companies of any size (very small, small, medium or large), as well as associations and any other types of legal entity that are being affected negatively by the economic effects of Covid-19, may apply to this new insolvency proceeding in order to reach an agreement with their creditors by means of a business restructuring plan or “Plan de Restructuración Empresarial - PRE”.

The sole purpose of the PRE is to reschedule unpaid obligations.

Unlike the Ordinary Insolvency Proceeding (already stated by the Peruvian Insolvency Law), under the PARC´s provisions, the Creditors´ Meeting will not be able to replace partially or totally the management of the debtor, remaining such debtor “in-possession” of its business throughout the proceeding.

Also, the PARC will culminate with the approval or disapproval of the PRE by the Creditors´ Meeting.

It is still pending for the Government to approve the PARC´s regulations, for which a period of 20 working days have been granted. Such regulation will address requirements, terms, proceedings, stages of the proceedings and Creditors’ Meeting decisions, among others.

PARC will be a temporary restructuring system that will only be available until December 31st, 2020.

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COLOMBIA

MEXICO PERU

Is there any suspension of obligations related to processes for filing for insolvency and of creditor’s right to request opening of insolvency proceedings?2

No. According to Article 20, Law 1116/06, in case that the debtor is admitted to a reorganization proceeding before the Superintendence of Corporations, all the collection proceedings (“Procesos Ejecutivos”) before any Court in Colombia will be pulled to the Insolvency Proceeding to be decided by the Superintendence of Corporations. Hence, all Courts might lose competence to decide on going collection proceedings against the debtor and any credit against such debtor shall be filed before the Superintendence of Corporations to be decided in the Reorganization Proceeding.

The Federal Judicial Branch, to which the insolvency courts (juzgados de distrito) belong, suspended activities since March 18, 2020 and until May 31, 2020. Procedural terms and deadlines have been suspended and federal courts are only addressing urgent cases (mostly related to criminal matters); insolvency proceedings are not part of those urgent cases, with the exception of precautionary measures or pending resolutions at the appeal courts.

No, there is not any suspension of obligations regarding the filing for insolvency whether requested either by debtors or creditors.

What is more, as a consequence of the emergency measures issued by the Government, Indecopi has suspended not only the means to attend requests from the public nationwide but also all terms applicable toward administrative proceedings.

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RESTRUCTURING & INSOLVENCY

Are there any specific guidelines and or liabilities for Company Directors?3

No. Law 1116 provides that when a company is under an insolvency process in Colombia, the shareholders, administrators, statutory auditors, and employees of the company will be liable for the payment of any outstanding external liabilities, whenever due to their negligent or willful misconduct the company’s assets suffered deterioration. The liability established in this special regime will be enforceable without limitation of any other sanctions or penalties that may arise and without regard to the type of company. Shareholders who did not have knowledge of the action or omission or have voted against it will not be subject to said liability, provided they do not carried out such action or omission.

Not specifically.

Directors of a company organized under Peruvian law have the fiduciary duty to act with the diligence of an “orderly businessman” and as a “loyal representative”, being bound to confidentiality regarding the businesses of such company and the information received acting in their respective roles; as well as avoiding conflicts of interest. As opposed to officers who are employees and discharge the duties corresponding to their respective positions individually, directors do not have individual powers (are non-executive) and act collegially in the board of directors. The fiduciary duties of directors are owed to the company first and then -indirectly- to the shareholders of the company in general. The above applies when (i) a company is nearing insolvency and (ii) a company is insolvent. The same applies in scenario in which a company has filed for or been subjected to an insolvency proceeding under Peruvian Insolvency Law, up to the point when a creditors’ meeting is installed, at which time: (a) in a reorganization proceeding, the creditors’ meeting may decide to keep the current directors and officers in place or replace partially or completely the administration of the company (in all cases, the same fiduciary duties will continue to apply to the members of the board of directors and officers that continue in their positions or are appointed); or, (b) in a liquidation proceeding, the creditors’ meeting shall appoint a liquidator, who shall assume all functions and powers generally attributed to the board of directors and officers of the company.

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RESTRUCTURING & INSOLVENCY

What is the current impact of the COVID-19 crisis on the operation of Insolvency courts and tribunals?4

In response to the COVID-19 crisis, Law No. 21.226 was enacted, establishing an exceptional regimen for judicial proceedings, hearings, deadlines, and for the exercise of actions. There is no specific regulation for insolvency’s proceedings. Therefore, they have continued their regular course, except for hearings at the same Court, which have been conducted remotely. However, Courts may not order actions that, if carried out, may affect the defense to any of the parties, which can happen when due process standards are not followed. Finally, all the evidentiary terms that would have started before or during the period Law No. 21.226 is in force, will be suspended.

The Superintendence of corporations, which is the insolvency Judge in Colombia is operating normally since its role with COVID-19 is crucial to safeguard the private sector. Superintendence of Corporations estimate that 1300 to 2700 companies will apply to insolvency proceedings due to the COVID-19. Also, on April 15, 2020 the government issued the Decree 560 of 2020 that aim to recover companies by the creation of fast-track insolvency procedures and mechanism from other jurisdictions (Such as DIP Financing) that seek to obtain liquid assets (cash) to those companies affected by the pandemic situation. There are two fast-track proceedings developed by the Government with the Decree already mentioned:

• Mediation is available for companies and another entities excluded from Law 1116/06 according to article 3 of such Law (public entities, health entities, among others) and is a 3-month procedure in which the debtor have to negotiate a payment plan with its creditors before a mediator appointed by the Chamber of Commerce located in the domicile of the debtor. In case of success in the negotiation and approval of the payment plan, such plan has to be validated by the judicial authorities (Courts or the Superintendence of Corporations) or by an arbitral tribunal in case that debtor and creditors agreed an arbitral agreement in the payment plant. Currently, the Government is finishing a new Decree in order to include new rules to the mediation proceeding.

• Emergency Negotiation Proceeding has exclusive application to companies (Commercial companies) and is also 3 -month procedure that simplifies the timings of the reorganization proceeding. During the 3-month period the debtor has to settle any objection that creditor may have against the project of credits and negotiate the payment plan with creditors. The payment will be validated after the 3-moth period by the Superintendence of Corporations who will be the natural Judge for this proceeding.

• It is important to bear in mind that Decree 560 only ruled new modalities of the reorganization proceeding that have the main purpose of saving companies. However, the Government is studying the possibility to issue a new Decree in order to create new proceedings for Bankruptcy (judicial liquidation), this is, to conclude operations and closure of companies.

As mentioned before, while the social isolation measures are in place, neither the headquarters of Indecopi (First and Second Instance) - that operates in Lima - nor the other offices that operate along the different regions of the country will serve the public. However, Indecopi is currently implementing the possibility of conducting insolvency proceedings remotely.

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The COVID-19 crisis has had a major impact on insolvency proceedings, given that, as mentioned above, insolvency courts will be under suspension for a total period of two and a half months (if not furtherly extended); this is unprecedented in the Mexican Federal court System. Efforts are being made to resume some of the courts’ activities, with the use of new technologies; for example, the Supreme Court and Circuit Collegiate Courts (part of the Federal Judicial Branch) are starting to hold some sessions (to discuss and solve some of the pending cases) through videoconferencing.

MEXICO

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TAX

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TAX

Have there been any extension of deadlines for filings or payments, deferred payments, or accelerated refunds or returns resulting from the COVID-19 response?1

Yes. The filing of the annual corporate income tax payment for SMEs (companies with revenues not exceeding UF 100,000, approx. USD 3.350.000) is postponed until July 31, 2020, notwithstanding that the corresponding income tax statement must be submitted through Form No 22 up to April 30, 2020.

Refund and remission of taxes withheld from independent workers during January and February 2020, in April 2020 rather than may 2020.

Greater flexibility was granted in the deadlines for submitting affidavits associated with the 2020 income operation.

Income tax refunds are anticipated for SMEs, which will receive their refunds in the month of April 2020.

The payment of VAT is postponed for the next 3 months for companies with sales of less than UF 350,000, approximately USD 11,720,000.

Deferred payment of VAT is allowed in 6 or 12 monthly instalments with 0% interest rate. It begins to apply from July.

Yes, the government established the extension of deadlines for filing and/or payment of income tax due, as follows:

First installment:

The new deadlines to pay the first installment, based on the last figures of the tax ID; starting on April 21 and ending on May 19, 2020.

The first installment corresponds to 50% of the tax due for the fiscal year 2018.

Second installment:

To file and pay the second installment, based on the last figures of the tax ID; starting on June 1 and ending on July 1, 2020.

When the Taxpayer has already filed the tax return on the due date for the First Installment, the first installment will be equal to 50% of the tax due, and the remaining 50% will be paid as second installment.

Also, the Government decided to defer the deadlines to file the annual report of assets owned abroad: The new deadlines to file the Tax Return, based on the last figures of the tax ID; starting on June 1 and ending on July 1, 2020.

Additionally, the Administration modified the following deadlines for the taxpayers that develop passenger air transport activities, hotel services and entertainment activities:

For major taxpayers that develop the mentioned activities, the deadline to pay the second installment of the income tax is July 31, 2020 and the third installment August 31, 2020.

For taxpayers not classified as major taxpayers that develop the mentioned activities, the deadline to pay the first installment of the income tax is July 31, 2020 and second installment August 31, 2020.

Additionally, the Government created an abbreviated procedure of refunds of balance in favor. In these terms, established that taxpayers and responsible for income tax and value added tax, not being high risk profile for tax purposes, will be authorized to file for refunds and/or compensations of balance in favor through an abbreviated procedure. The authorization will take place within 15 days as from the date of request.

Only for local taxes in Mexico City and other municipalities around the country. In Mexico City, payment of local taxes, such as payroll tax, term has been extended to April 30, 2020.

Suspension of certain legal terms and deadlines terms from May 4th to May 29, 2020 (excluding those that can be processed electronically).

PRODECON (Taxpayers Ombudsman): no extensions, operating electronically (e-mail).

Individuals – extension to file 2019 tax return until June 30,2020.

The deadlines for affidavits and payment of taxes have been postponed depending on the type of tax, timing and level of income generated in 2019. Similarly, in the case of compliance with formal obligations before the tax administration. In most cases, the deadlines have been postponed until June.

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TAX

What relief measures have been announced or implemented in relation to Corporate / Business income tax?2

» Monthly provisional payments (PPM) are suspended for the next 3 months.

» All expenses of the companies to face the contingency will be accepted as a tax expense.

» The deadline for eligibility for the taxation schemes under the new Article 14 of the Income Act is extended to 31 July 2020, instead of April 30 2020.

No relief measures regarding the corporate/business income tax have been announced or implemented in Colombia.

No Corporate income tax relief whatsoever or extension of due dates

CHILE COLOMBIA MEXICO PERUThe deadlines for filing the Annual Income Tax Declaration and payment of Income Tax for individuals and corporations whose income in fiscal year 2019 has not exceeded 21,000,000 (approximately US$6,000,000) have been postpone to june and july.

The deadlines for the presentation of Affidavits and payment of taxes to the National Superintendence of Customs and Tax Administration have been postponed for:• The month of February 2020,

until June for taxpayers who did not exceed S/9,660,000 (approximately US$2,760,000) for income in fiscal year 2019.

• The months of March, April, May and June 2020, until June and August for taxpayers who did not exceed S/21,000,000 (approximately US$6,000,000) for income in fiscal year 2019.

Exceptional rules have been established for the suspension or modification of payments on account of the 3rd Category Income Tax from April to July 2019. The suspension or modification will depend on a comparison with the monthly income of the year 2019.

The deadline has been extended to allow resident taxpayers to charge their net losses for the year 2020, year by year, until the amount is exhausted, against the net income they obtain in the 5 subsequent years.

A debt deferment and/or payment plan regime managed by SUNAT has been established, which allows debts to be deferred for up to 6 months and a payment plan in instalments of up to 36 months. The interest rate of this regime will be 40% of the Deferred Interest Rate (TIM).

A special depreciation regime has been established for taxpayers under the General Income Tax System, which consists in the fact that, from fiscal year 2021, buildings and constructions will be depreciated by applying an annual depreciation percentage of 20% provided that certain requirements are complied with. Additionally, the depreciation rates have been modified for certain assets of the fixed assets of the companies such as data processing equipment, machinery, vehicles, among others.

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What measures have been announced or implemented in relation to VAT?3

The same states in question 1:

» The payment of VAT is postponed for the next 3 months for companies with sales of less than UF 350000, approximately USD 11.720.000.

» Deferred payment of VAT is allowed in 6 or 12 monthly instalments with 0% interest rate. It begins to apply from July.

The Ministry of Finance established the exemption of Value Added Tax for the import and sale of 211 goods and medical supplies, during the Health Emergency.

These goods are related to:

» Medical Equipment

» Hospital beds

» Drugs and health components

» Alcohol

» Masks, gloves and other medical apparel

» Cleaning products

» Disinfectant products.

Additionally, the government decided to defer the deadlines for the taxpayers that develop passenger air transport activities, hotel services and entertainment activities, as follows:

» For major taxpayers, individuals or legal entities with net income, at December 31, 2019, equal or greater than 92.000 Tax Value Units (COP 3.152.840.000 for 2019) that develop the mentioned activities, the deadline to pay the tax return, Bimester March-April 2020, is June 30,2020.

» For major taxpayers, individuals or legal entities with net income, at December 31, 2019, less than 92.000 Tax Value Units (COP 3.152.840.000 for 2019) that develop the mentioned activities, the deadline to pay the tax return, Quarter January-April 2020, is June 30,2020.

In Mexico, no such tax measures have been issued in relation to COVID-19.

The Special Early Recovery Regime of the VAT has been extended until December 31, 2023; and, exceptionally, taxpayers whose annual net income is greater than 300 UIT and up to 2 300 UIT and who are under the MYPE Tax Regime or the General Income Tax Regime may benefit from it.

The deadlines for the filling of Declarations and payment of VAT to the National Superintendence of Customs and Tax Administration have been postponed for:

The month of February 2020, until June for taxpayers who did not exceed S/9,660,000 (approximately US$2,760,000) for income in fiscal year 2019.The months of March, April, May and June 2020, until June for taxpayers who did not exceed S/21,000,000 (approximately US$6,000,000) for income in fiscal year 2019.

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TAX

What measures have been announced or implemented in relation to indirect taxes, such as real property taxes?4

The payment of April´s real estate tax is postponed for companies with sales of less than UF350.000, approximately USD 720.000, and for individuals with property with a tax assessment of less than USD 155.000. It applies from April.

The payment of this fee may be made in three installments, together with the following three contribution installments, with an interest rate of 0%.

Cancellation, in whole or in part, of the interest applicable to late payments of real state tax up to 30 September 2020.

In some jurisdiction has been announced measures to defer the deadlines to pay territorial taxes. For example, in Bogota the Administration established a new deadline for the payment of the Property Tax for residential and non-residential properties, June 5,2020 with a 10% discount and without discount until June 26, 2020.

No. Each Local Government shall issue its own regulation.

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Have there been any particular measures related to trade or customs duties and related taxation issues?5

No. The Ministry of Trade, Industry and Tourism establishes a tariff of 0% to the most favored nation imports of the following products, according to the specific tariff subheadings: Food supplements, Drugs, Mineral products (salt), Chemical products (chlorine, acids, sodas), Plastics (specifically gloves), Toilet paper, Screens not for TV use and Medical devices. This decision is valid for 6 months, after which the previous tariffs will be reestablished.

Additionally, the Government bans the export or reexport of the following products, according to the corresponding tariff subheadings: Ethyl alcohol, Drugs, Soaps, Disinfectant, Plastic gloves (medical or otherwise), Toilet paper, Protective facemasks and Equipment and furniture for medical uses.

For the distribution of these products in the country, priority will be given to hospitals, clinics and other healthcare providers. If it is determined that there is enough supply, export of surplus products can be authorized, provided that the internal market is not compromised.

No. Apply 0% tariffs on imports of goods related to the fight against the COVID pandemic 19. The items covered by this benefit are related to medicines, supplies and medical equipment.

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TAX

Are there any announced or implemented measures that relate to tax audits or sanctions?6

In the case of SMEs and people with low income, flexibility is established to enter into agreements for the payment of tax debts with the General Treasury of the Republic, without interest or fines. In addition, judicial collection and auction actions for tax debts are temporarily suspended.

Total or partial remission of criminal interest and fines applied to tax returns filed late or other procedures related to tax returns established in the Income Tax Act and in the Sales and Services Tax Act, until 30 September 2020.

So far, the government has not been announced or implemented any to tax audits or sanctions. However, the government established that all mechanisms regarding payment facilities may be requested under the Health Emergency.

No.

CHILE COLOMBIA MEXICO PERUSUNAT shall not impose fines for tax violations committed or detected as of March 16, 2020 and while the National State of Emergency lasts.

The other tax administrations in Peru (local and regional governments and regulatory agencies) must issue their own regulations applicable to this context.

The suspension of the calculation of terms was declared for starting and processing administrative procedures and of any kind: Until May 27, unless by specific rule each entity indicates that the suspension is not applicable. Likewise, the term to start has been suspended in administrative procedures subject to positive and negative silence that are pending: Until May 20.

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Are there any other noteworthy tax relief measures that are relevant to your clients (stamp duties, payroll, transfer pricing, others)?7

The rate of the Stamp Tax is temporarily reduced to 0% for all taxes accrued from money credit operations between April 1, 2020 and September 30 of the same year, both dates inclusive.

In the case of bond issuance lines or short-term debt securities lines whose first disbursement is made within the period between April 1, 2020 and September 30 of the same year, notwithstanding the application of the reduced rate of 0% for disbursements made in this period, the determination of the applicable Stamp Tax to subsequent disbursements included in the line will be maintained, until completing the maximum rate, currently 0.8%.

However, operations or documents subject to refinancing which taxes have accrued in the period between April 1, 2020 through September 30 of the same year with the reduced rate of 0%, shall be deemed to have been affected by Stamp Tax rates that would have been applicable without the transitional reduction.

The government has focused on deferring the terms of filing and paying taxes. So far, no other tax relief mechanism has been implemented.

However, the Ministry of Finance established a new solidarity tax by COVID 19 with the purpose for social investment in the vulnerable middle class and informal workers. The taxpayers will be public servants and individuals by contract that provide professional services and support to public management with salaries and fees of more than COP 10,000,000, including retired members who are beneficiaries of the mega pensions of COP 10,000,000 or higher. The taxable base will be the monthly salary/fees and the Tax rate will be proportional to the monthly income.

Furthermore, The Tax Authority established that all the deadlines of administrative procedures are suspended and will be reinstated on the business day following the end of the health emergency decreed by the government.

In tax matters, the suspension does not apply to i) presentation and payment of declarations in the established periods, ii) procedures of Devolution and/or Compensation that are requested online, iii) payment facilities requested online, iv) management of judicial deposit titles, and v) termination of seizure requests made online.

In customs matters, the suspension does not apply to i) obligations related to the arrival of cargo, ii) obligations related to the regime of ordinary imports, iii) the terms for the consolidated payment of customs duties, and iv) obligations related to the special import declaration, for free trade zone users.

Local Taxes And Social Security Contributions• Mexico City

> Suspension of certain legal terms and deadlines for administrative procedures from March 23 to May 29, 2020 .

> Local taxes due during April 2020 were allowed to be paid no later than April 30, 2020.

• Other jurisdictions: > Local incentives for state taxes

(relief or extensions) may be available in some States, ranging from extensions to file and pay taxes, to waivers on certain state taxes such as wage tax, property tax, vehicle registration, hotel tax, among others.

Social security contributions (IMSS)Possibility to defer social security payments for up to 48 months, prior agreement with IMSS, and upon a 20% upfront payment for the employer quota and 100% of the worker quota. No posting of a bond or other kind of guarantee is needed. The monthly interest rate ranges between 1.26% and 1.82%.

Housing contributions (Infonavit)Benefit for small companies (up to 250 employees) - extension to pay housing contributions corresponding to the second and third bimesters of 2020 until September 2020.

The deferment and/or fractioning and/or particular refinancing of tax debts granted by SUNAT, will not be lost if there is a default in the payment of the fee corresponding to March and April 2020, provided that said fee is paid, including accrued late interest, until May 29, 2020.

The destruction of stockpiles may be accredited by means of a report, without the need for the presence of a notary public, provided that SUNAT is notified by e-mail no less than two (2) working days prior to the date on which such destruction is to take place. This provision is in force until July 31, 2020.

The filing of informative declarations, accounting books and records and other formal obligations to the National Superintendence of Customs and Tax Administration for the months of February, March. April, May and June2020 are postponed to May. June, July and August 2020.

SUNAT’s virtual intake desk has been set up so the taxpayers may submit documents that are regularly presented personally at the Tax Administration offices. In addition, through this channel, the Tax ID may be requested in an exceptional manner.

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